The Right-to-Buy programme, which enabled council tenants to buy the home they lived in at a discount price, was one of Margaret Thatcher’s less controversial policies during her time in office. By 1987, 1m council houses in Britain had been sold to tenants, with the aim of paving the way to a property-owning democracy where everyone had a real stake in their communities.

But Right to Buy also had its opponents, especially among social policy experts who feared its political implications. If you give low-earners a taste of private ownership and the independence that comes with it, doesn’t that undermine support for government welfare more generally?

Another claim is that Right to Buy contributed to Britain’s current housing shortage. In this version of events, the Thatcher government short-sightedly sold off all the public stock, and as a consequence there is nothing left now to house the needy.

But there are problems with this interpretation. Even though Right to Buy was big in scale, Britain still has one of the largest social housing sectors in the developed world today. Social housing accounts for a fifth of the total housing stock, a higher share than in France and the Scandinavian countries, which social housing enthusiasts often present as role models.

How can the social housing sector still be so large after decades of council house sales? The answer is simple: because it was huge when Right to Buy started. In 1980, the public sector acted as a gigantic “over-landlord”, controlling a third of all housing units. As far as the housing stock was concerned, when Thatcher came to office the UK had the ownership structure of an Eastern European country.

Of course, critics of Right to Buy are right to point out that demand for social housing vastly outstrips its supply. In England alone, there are almost 2m households on a social housing waiting list. But it’s wrong to interpret this as a consequence of a specific lack of social housing. Rather, there is a lack of affordable housing in general, and the oversubscribed social housing waiting list is just one of its many manifestations.

Right to Buy did, however, coincide with a slowdown in the construction of council housing. But this would not have been a problem if the private sector had been allowed to take up the slack. In most of the developed world, housing is primarily delivered through market mechanisms. The problem in Britain is that private housing development has remained shackled by a planning system that opens every door to nimbyism. This explains why the rate of housing completions went down from 47 units per 10,000 inhabitants in 1979 to just 37 in 1990, and declined even further from then on.

Right to Buy had nothing to do with this. Rather, in a decade in which many sectors experienced deregulation and liberalisation, land use planning bucked the trend, and remained under tight regulatory control. It was probably the sector in which the Thatcher government was as far away from Thatcherism as it gets.

Read the original article here.

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Head of Health and Welfare

Dr Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow, becoming its Senior Research Fellow in 2013 and Head of Health and Welfare in 2015. Kristian is also a Fellow of the Age Endeavour Fellowship. He studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). In 2013, he completed a PhD in Political Economy at King’s College London. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and at King's College London, where he taught Economics throughout his postgraduate studies. He is a regular contributor to various journals in the UK, Germany and Switzerland.




1 thought on “Right to Buy is not to blame for British housing shortage”

  1. Posted 14/04/2013 at 09:33 | Permalink

    Land use planning and the provision of social housing evolved together in the UK postwar. On one side, government control of land use became status quo and on the other provision of homes, on concentrated ‘council estates’ was something central and local governments of all colours bragged about. It was for some time a bargain that protected free visual amenities for a private homeowners, provided decent well-sized homes (or a tower block flat – luck of the draw) at a skewed price for some and gave politicians a supply of clients, in locations best suited for electoral purposes.

    RtB may have broken one part of the arrangement, but, as you say, Mrs Thatcher’s zeal for the market was blind to unlocking planning control.

    And the proceeds of sale of these capital assets by local authorities went to central government as handy revenue stream.

    BertEBassett

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